Ryan Morris is a 29 year-old managing partner of Meson Capital, a San Francisco based hedge fund with $15 million assets under management, and he's certain that OMEX is going all the way to zero.
The company, he says, is hemorrhaging money. In its quest for buried sea treasures, OMEX is coming up empty.
Morris doesn't usually short companies to zero - activist investing is more his forte - but the deeper he dug into OMEX, the weirder things got.
Founded in 1994 by Bob Hope's former PR manager, Morris says that OMEX insiders made unfulfilled promises to investors and collected over $20 million in cash while the company has lost over $180 million since 2000.
"I heard about it maybe a year ago and didn't pay much attention because it seemed so ridiculous," said Morris "Then around 6 months ago they [OMEX] disclosed that they set up all these off-shore entities off the coast of Panama and Bahamas, and it was just one of those things where every layer you peel back the onion is just more horrific."
Back in 2007, the company essentially peaked when it dug up the remains of a Spanish warship that sunk in 1804, Nuestra Señora de las Mercedes - OMEX called the site 'Black Swan'. Buried deep underwater were 594,000 silver coins, as well as a couple hundred gold ones, according to Bloomberg.
A big score, sure, until the Spanish government sued to get their booty back. Under maritime law, if a ship is sunk while doing its duty, everything on it belongs to its country of origin. So after a five year battle, OMEX lost its haul and was fined $1,072,979 in the process.
Last year, OMEX's CEO, Greg Stemm admitted that the company has spent more money on wrecks it hasn't found than the $2.6 million it spent on Black Swan. Naturally, investors were furious.
Ryan Morris, Meson Capital Partners
In response, the company called Meson's strategy a "short and distort," and wrote a letter to shareholders saying:
"Odyssey's management believes that it is in the best interest of our shareholders to remain focused on business rather than debating or responding to rumor and innuendo. However, due to the number of inquiries to the company, management felt it important to reaffirm and stand by the accuracy of all information which has been released by the company."
After that, OMEX called a conference call, but did not take questions.
Meson pointed out in a follow-up report, that OMEX didn't refute any of its statements about the company on the call: Questions related to how the company loses $20 million a year, and can spend $25,000 a day on its ships.
Or questions related to Neptune Minerals, Inc. Before Meson's report, OMEX claimed that Neptune was the source of $108 million in "off balance sheet value" for the company. After the report, OMEX issued a heavily revised 10-Q in which Neptune appears, to Meson, to be insolvent.
When you find a company like this, said Morris, ""There's a lot of horror and befuddlement."
No one ever said treasure hunting was easy.